Report Highlights:

Marketing Year (MY) 2013/2014 fresh lemon production is estimated to decrease by over 40 percent to 750,000 MT due to frosts during the winter of 2013 and a drought which affected most of the country’s growing areas throughout 2013. Exports and domestic consumption are expected to decrease to 250,000 MT and 50,000 MT, respectively. Lemon for processing is forecast to decrease by about 50 percent to 450,000 MT due to smaller production. Orange production is forecast to increase to 550,000 MT, and consumption is also up at 365,000 MT. Exports are projected to remain stable at 70,000 MT. Tangerine production is expected to increase to 260,000 MT, and consumption is estimated to go up to 135,000 MT, while exports remain stable at 90,000 MT. Grapefruit production is forecast to decrease to 60,000 MT, and consumption is down to 40,000 MT, while exports are estimated to remain unchanged at 2,000 MT.

Executive Summary:

For MY 2013/2014, fresh lemon production is estimated to decrease by over 40 percent to 750,000 MT due to frosts during the winter of 2013 which reduced fruit volumes and damaged a significant number of trees, and a drought which affected most of the country’s growing areas throughout 2013. Lemon exports and domestic consumption will decrease to 250,000 MT and 50,000 MT, respectively, due to smaller production. Lemon for processing is forecast to decrease by about 50 percent to 450,000 MT due to smaller production.

Post estimates fresh orange production for MY 2013/2014 at 550,000 MT, up 50,000 MT from the previous year. Exports are projected to remain stable at 70,000 MT as a result of large domestic consumption and more fruit devoted for processing. Consumption is forecast to increase to 365,000 MT due to larger production.

Fresh tangerine production is expected to increase to 260,000 MT from the previous year. Although weather conditions for both oranges and tangerines have been favorable so far, the effects of the frost of June 2012 are expected to reduce fruit volumes below normal levels. Tangerine exports are estimated to remain unchanged at 90,000 MT due to larger domestic consumption and more fruit devoted for processing. Consumption is expected to increase to 135,000 MT as a result of larger production.

Fresh grapefruit production is estimated to decrease to 60,000 MT, and consumption is down to 40,000 MT due to smaller production. Exports are estimated to remain unchanged at 2,000 MT, due to decreasing demand for this type of fruit.

Production:

For MY 2013/2014, fresh lemon production is estimated to decrease by over 40 percent to 750,000 MT (down 550,000 MT from the previous year) as a result of severe frosts during the winter of 2013 which reduced fruit volumes and damaged a significant number of trees, and a drought that affected most of the country’s growing areas throughout 2013. For MY 2012/2013, production is projected to remain stable at 1.3 MMT in line with official USDA estimates. Lemon production in MY 2011/2012 remained unchanged at 1.3 MMT. Main lemon varieties grown in Argentina are Genova and Eureka (Source: Federcitrus).

Fresh orange and tangerine production for MY 2013/2014 is forecast at 550,000 MT and 260,000 MT, respectively. Although weather conditions have been favorable so far, the effects of the frost that affected the main sweet citrus growing region of Argentina in June 2012 are expected to reduce fruit volumes below normal levels. Production for MY 2012/2013 is estimated at 500,000 MT (up 160,000 MT) for oranges, and 250,000 MT (up 50,000 MT) for tangerines, compared to official estimates. Although Post’s numbers reflect and upward revision from USDA’s official numbers, production is down from the previous year due to the effects of the severe frosts of early June 2012. It is estimated that the plants will not fully recover until 2014. For MY 2011/2012, orange and tangerine production remained unchanged from official estimates at 565,000 MT, and 290,000 MT, respectively. The main orange varieties grown in Argentina are: Navetina, Salustiana, Washington Navel, Navel Late, Valencia Seedless, and Valencia Late; main tangerine varieties: Clementina, Clemenvilla, Ellendale, Malvasio, Montenegrina, Murcott, and Ortanique (Source: Federcitrus). Overall, the citrus sweet varieties that have been expanding faster are seedless varieties, such as Tango for oranges, and Clementines and Clemenules for tangerines.

Fresh grapefruit production for MY 2013/2014 is expected to decrease to 60,000 MT from the previous year as area planted to grapefruit is going down and being replaced with sugar cane and soybeans. In addition, area devoted for grapefruit production has been decreasing in the past few years due to less global demand for this type of fruit. Production for MY 2012/2013 is forecast to decrease to 70,000 MT from previous USDA official estimates. Production in MY 2011/2012 remained stable at 100,000 MT. The main grapefruit varieties grown in Argentina are: Marsh Seedless, Star Ruby, and Red Ruby (Source: Federcitrus).
One of the main concerns affecting the citrus sector in Argentina continues to be increasing production costs in the past six years (especially, labor, inputs, energy, inland and ocean freight), as a result of a high inflation rate (between 20-25 percent during the past 6 years, and estimated at around 28 percent for 2013) which causes a significant loss of competitiveness for local exporters. (The salary increase reached 21 percent in 2012 and, in 2013, it was agreed upon 23 percent with the lemon sector, and about 24 percent with the sweet citrus sector.) Intermittent strikes by both SENASA and customs inspectors have disrupted trade over the past few years.

During the past few years, the Government of Argentina (GOA) reduced gas supplies to major industrial operations in the country to assure household gas supplies during winter (months of May to September). Gas is mostly used in lemon processing during this period, when lemon processing plants are in full operation. In the Province of Tucuman, main lemon growing region in the country, gas supplies were significantly reduced in the past and the government has announced new reductions in the next winter season. Gas supplies are expected to continue to be scarce as no major gas investments are being planned to overcome this energy problem. The Governor of Tucuman Province requested that the province be exempted from gas rationing during the processing season. Although this is becoming an increasingly serious problem, so far, the local industry has not been significantly affected. A few of the leading lemon industries have developed operations which recycle industry waste into gas. However, the industry is far from becoming self-sufficient in gas supplies.

Area Planted:

For MY 2012/2013, area planted to lemons is estimated at 49,500 ha, in-line with USDA official estimates. Area is expected to remain unchanged in MY 2013/2014, as producers will only invest in plant replacement to overcome the effect of the frosts, and will only invest in land marginally. Lemon production used to compete with sugar cane production in the Province of Tucuman. However in the past few years this trend has slowed despite the challenges in the sugar cane and bioethanol industries. Currently, ethanol producers are facing environmental contamination issues, and the sugar industry has not been making significant investments due to the decrease of international sugar prices and high production costs. Lemon production also competes, although to a lesser extent, with urban expansion and soybean production, which has grown in marginal areas. According to private sources, the Argentine lemon sector is not expected to expand significantly through land investment but through the incorporation of new genetic material, which would improve yields.

For MY 2012/2013 and MY 2011/2012, Post decreased area planted to oranges and tangerines to 43,700 hectares and 32,700 hectares, respectively, as a result of the National Institute of Agricultural Technology’s (INTA in Spanish) latest official statistics. In MY 2013/2014, area is expected to remain unchanged for both citrus fruits. Severe frosts in the main sweet citrus growing region of the country destroyed citrus plants that will not be replaced. Moreover, the economic and financial crisis makes the business less profitable to the citrus sector reducing investment in land and plant replacement. The overall trend is that, most of the area in northeastern Argentina (NEA) where damaged citrus trees were removed and will not be replaced, will be devoted for forestation. The area in northwest Argentina (NOA) where orange and grapefruit trees are not being replaced is being devoted for sugar cane and soybean production.
For MY2013/2014, area planted to grapefruit is projected to decrease from the previous year from 6,150 hectares to 6,100 hectares as grapefruit production competes with other more profitable crops, such as soybeans and other citrus fruit. No investment is being made in grapefruit tree replacement. In MY 2012/2013, area is estimated to remain unchanged from official estimates at 6,150 hectares. For MY 2011/2012, area remained stable at 6,200 hectares, compared to official USDA estimates.

Processing:

For 2013/2014, fresh lemon for processing is estimated to decrease almost by half to 450,000 MT from the previous year due to smaller production. For MY 2012/2013, it is projected at 955,000 MT, 15,000 MT smaller than USDA official estimates, due to larger exports. Fresh lemon for processing in MY 2011/2012 remained stable at 963,000 MT. Many producers chose to harvest smaller-sized fruit, which were devoted for processing, leaving larger sizes in the plants to obtain fruit suitable to the needs of more demanding export markets.

Fresh orange for processing in MY 2013/2014 is expected to increase to 115,000 MT from the previous year as a result of larger production. In MY 2012/2013, it is estimated to increase to 90,000 MT, up 20,000 MT from official estimates, as a result of larger production. Fresh tangerine for processing in MY 2013/2014 is estimated to increase slightly to 35,000 MT, compared to the previous year, due to an increase in production. For MY 2012/2013, it is forecast to decrease from official estimates down from 35,000 MT to 30,000 MT due to larger exports and domestic consumption. Fresh grapefruit for processing in MY 2013/2014 is expected to decrease to 19,000 MT due to smaller production. In MY 2012/2013, grapefruit for processing is expected to decrease from official estimates, down from 33,000 MT to 24,000 MT, as a result of smaller production. For MY 2011/2012, orange, tangerine, and grapefruit for processing remained unchanged from official estimates at 104,000 MT, 40,000 MT, and 42,000 MT, respectively.

Over 50 percent of total lemon production in Argentina is processed by four plants, of which three are located in the Province of Tucuman, and one in the Province of Salta. In addition, there are about 35 high-tech packing citrus plants which are approved for export by the Argentine sanitary authorities.

Investment:

After recuperating from the severe effects of this year’s frosts in the main lemon growing region of Argentina, investment in land devoted for lemon production is expected to continue to expand marginally, especially in the Provinces of Salta and Jujuy. In addition, two new packing and processing plants became operational in 2012 in Tucuman. Investment is due to the potential opening of significant export markets, such as the U.S. and China, for fresh lemons and the expansion of leading beverage companies in Asia. Despite the lack of profitability and the domestic economic crisis that the lemon sector is undergoing, larger producers continue to invest in new lemon trees to replace old trees. Tree replacement is carried out at an average annual rate of five percent. Additional investments are being made on fruit packing, packaging, and fractioning machinery.

Consumption:

Fresh lemon domestic demand tends to be inelastic and consumption does not typically vary much over time, unlike oranges and tangerines, which are often substituted by other types of fruit depending on the price. Lemon consumption in MY 2013/2014 is estimated to decrease to 50,000 MT from the previous year due to smaller production. Consumption in MY 2012/2013 is forecast to remain unchanged from official estimates at 65,000 MT.

For MY 2013/2014, fresh orange domestic consumption is projected to increase to 365,000 MT, compared to the previous year, due to larger production. For MY 2012/2013, consumption is estimated at 340,000 MT, up 110,000 MT from official USDA estimates, as a result of larger production than initially expected.

Tangerine domestic consumption in MY 2013/2014 is forecast to increase to 135,000 MT from the previous year due to larger production. Consumption in MY 2012/2013 is expected to increase to 130,000 MT from previous official estimates as production was larger than originally expected.

Grapefruit domestic consumption for MY 2013/2014 is projected to decrease to 40,000 MT from the previous year due to smaller production. For MY 2012/2013, it is estimated to remain unchanged from official estimates at 45,000 MT, despite smaller production, as less fruit will be devoted for processing.

For MY 2011/2012, domestic consumption for all four types of citrus fruit remained unchanged from official estimates at 70,000 MT for lemons, 376,000 MT for oranges, 150,000 MT for tangerines, and 57,000 MT for grapefruit.

Trade:

Exports

Fresh lemon exports for MY 2013/2014 are estimated to decrease to 250,000 MT (down 30,000 MT from the previous year), as a result of smaller production. Exports for MY 2012/2013 are forecast to increase from USDA official estimates to 280,000 MT, as a result of less fruit availability in the Northern Hemisphere countries. According to private sources, in the Province of Tucuman, it is possible to produce 350,000 MT of premium-quality fresh lemon to supply export markets. However, the fresh lemon export business is not attractive due to extremely high costs and low competitiveness. This scenario is not expected to change in the near future unless international lemon prices increase significantly, or there is a devaluation of the local currency vis-à-vis the dollar. In addition, the “All Lemon” certification seal that has been developed by the Argentine lemon sector (see Promotion Section) regulates the volume of fresh lemons for export, based on quality, to avoid steep price decreases.

Following the practice carried out in the past few years, relatively high volumes of fruit are being devoted for processing as a result of the decision made by the industry to export only fresh lemons meeting higher quality standards, thus restricting the export supply and preventing a steep decrease of international prices. This market strategy is working very well and is expected to continue.

Argentina does not export fresh organic lemons, given that fruit undergoes a bleaching process, which is not allowed under organic certification standards. However, some lemon by-products are produced and exported as organic.

For MY 2013/2014, fresh orange exports are expected to remain stable at 70,000 MT from the previous year, despite an increase in production of 50,000 MT, as a result of larger domestic consumption and more fruit devoted for processing. In MY 2012/2013, exports are expected to increase to 70,000 MT, compared to latest official estimates of 40,000 MT, due to larger production and stronger demand from export markets as a result of less fruit in the Northern Hemisphere.

Tangerine exports for MY 2013/2014 are expected to remain unchanged at 90,000 MT from the previous year, despite a slight increase in production of 10,000 MT, due to larger domestic consumption and more fruit devoted for processing. Exports for MY2012/13 are forecast to rebound to 90,000 MT (exports increased by half from official estimates) as a result of larger production and strong international demand. In addition, a few non-traditional markets were opened to Argentine tangerines in South East Asia, such as Philippines and Indonesia.

For 2013/2014 and MY 2012/2013, fresh grapefruit exports are projected to remain stable at 2,000 MT. Exports of this type of citrus fruit are negligible and domestic consumption is decreasing as grapefruit consumption is going down globally.

For MY 2011/2012, exports of the four types of citrus fruit remained unchanged from official USDA estimates at 267,000 MT for lemons, 85,000 MT for oranges, 100,000 MT for tangerines, and 2,000 MT for grapefruit.

Argentine fresh citrus fruit are exported to about 60 markets.

For MY 2013/2014, no major export market diversification is expected for citrus fruit. The EU and Russian markets are not expected to expand significantly as no growth in population is projected, thus, demand is forecast to remain stable. In addition, citrus fruit supply is expected to increase in the Northern Hemisphere producing countries, compared to the current season. Fresh lemon exports to non-traditional markets have been increasing in the past few years. Although South Africa is a significant challenge for the local lemon sector since it can reach Asia and the Middle East with more competitive prices, Argentine lemon companies are increasingly expanding exports to those non-traditional markets.

In January-October 2013, the EU remained the largest export market for most types of Argentine citrus fruit: lemons (68 percent market share), oranges (71 percent, from 58 percent in 2012), and grapefruit (71 percent); and the second largest market for fresh tangerines (19 percent, down from 26 percent the previous year). In addition, Russia was the largest market for tangerines accounting for an average of 49 percent of total Argentine tangerine exports, and the second largest market for lemons with 15 percent market share. Paraguay became the second largest market for grapefruit with 7 percent share, and also the second largest export destination by value for oranges, accounting for 27 percent share (although, by volume it accounted by only 4 percent share). Other markets which increased exports of Argentine lemons were Ukraine, United Arab Emirates, Albania, Serbia, Jordan, and Georgia, among others.

Imports

Citrus imports are expected to remain negligible in MY 2013/2014. This trend is forecast to continue in the future as Argentina is a net citrus fruit exporting country, and especially with government food import restrictions, which have been in place in the past few years (see Policy Section).

Policy:

Import and Export Regulations

Export taxes on fruits and vegetables are relatively low. In 2008, the GOA reduced these taxes by 50 percent (Official Bulletin, Decrees Nos. 38/2008 and 40/2008). Currently, export taxes for all citrus fruit are 2.5 percent. Part of Argentina’s export tax on citrus is rebated depending on the size of the container.

The Argentine fruit sector is concerned about the numerous trade restrictions and requirements affecting imports which have been instituted by the GOA. These policies hamper producers in acquiring needed production and processing inputs, which must be replaced by locally-manufactured products at higher costs, and have also reduced citrus imports, although imports have traditionally been small. Other measures require preapproval for imports weeks before beginning the importation process. Additional obstacles include the imposition of strict limits on foreign exchange transactions and restrictions against the payment of dividends and repatriation of profits, more widespread usage of non-automatic import licenses, and difficulties in obtaining certificates of country-of-origin for products to be imported.

Phytosanitary Issues

Argentine phytosanitary authorities continue negotiations with China to reopen the market for Argentine fresh lemons. Trade was interrupted in 2005 when China established cold treatment for all citrus fruit, which damaged the fruit quality. The industry has been focusing on other export destinations pending negotiations with officials in China. Currently, the market is open to fresh “sweet” citrus varieties.

Two citrus diseases are still of concern for APHIS and the U.S. citrus industry: Citrus Variegated Chlorosis (CVC) and Citrus Greening Disease (Huanglongbing or HLB). APHIS has worked with SENASA to develop a Pest Risk Assessment (PRA) and a set of risk mitigation measures to allow the United States to safely import lemons from northwest Argentina, including Tucumán. APHIS and SENASA continue to work to advance this issue; however, APHIS and the U.S. citrus industry are concerned about transmission of CVC in fresh fruit, and how to address the risk of introducing CVC via seeds in commercially imported lemons.

Citrus Greening: On July 4, 2012, APHIS was officially informed that a case of HLB was reported in one infected tangerine tree in Puerto Deseado, Province of Misiones (NEA region of Argentina – close to the border with Brazil). The infected tree was destroyed as a precautionary action. In addition, SENASA intensified the surveillance for citrus species in the area with sampling in 150 premises with negative results for both: symptoms and vector (Diaphorina citri) of the disease. SENASA stated that, since the location is not a citrus commercial area, and it is surrounded by national parks, it is likely that this was an illegal introduction from Brazil. Based on the above, SENASA still maintains its HLB-free status.

Marketing:

Prices

International (FOB) Prices for Fresh Citrus Fruit

Fresh lemon FOB prices during MY 2011/2012 were higher than the previous year as shipments were delayed since the harvest was delayed over a month due to heavy rains. As a result, Argentine lemons entered the European market when Spanish lemons had already been sold out, which increased prices for the Argentine citrus fruit. Prices during the marketing season of 2012/2013 continued to increase as a result of less fruit availability in Northern Hemisphere competing countries, such as Spain and Turkey. Overall, fresh orange and tangerine FOB prices were lower than 2011 and 2012 prices due to strong competition from South Africa, and grapefruit prices were mostly lower than the previous year.

The highest FOB price for lemons during January-October 2013 was $927/MT (March); for oranges, $437/MT (June); for tangerines, $869/MT (July); and for grapefruit, $800/MT (March).

Promotion

“ALL LEMON Tested & Certified for Export” is the Argentine quality seal which certifies the quality of about 80 percent of lemons devoted for export. Currently, this program, created in 2009, carries out audits of the 16 leading lemon producers and exporters in Argentina. Its primary goal is to develop and establish quality standards to be applied by lemon companies, which are committed to export a strictly selected product. Lemons identified under ALL LEMON parameters must comply with:

• High juice content

• Resistance and durability

• Firmness

• Freshness

• Uniform format

• Balanced color

• Skin in optimal condition

• Traceability and safety